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Posted on Nov 12, 06:56PM | IBNS
Apex industry body ASSOCHAM has suggested that listed and unlisted domestic infrastructure companies be allowed to list in overseas capital markets through direct equity shares as companies once listed abroad have better access to low cost funds and simultaneously they may also be allowed to set up an entity abroad to raise equity and invest the same in India.
Also, the transfer of holding to such an overseas entity from an Indian entity should be permitted at erstwhile CCI/Book Value as prevalent till March 31, 2010 as infrastructure projects are long-term and require high gestation.
This has been suggested in a note submitted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) to spur growth of infrastructure sector to the union finance ministry highlighting the bottlenecks in growth of the sector and their subsequent solutions.
Welcoming the recent several steps taken by the Government of India to encourage investments and extend required support to the infrastructure sector, ASSOCHAM president, Rajkumar Dhoot said, "Lack of availability of sufficient long term debt, dearth of equity funds, withdrawal of tax sops and absence of quick decision making are the key reasons responsible for a sluggish infrastructure growth in India."
Advocating the critical need for long-term bank finance availability for the infrastructure sector, ASSOCHAM has suggested for mandatorily increasing the bank lending by way of incentives.
"Considering the priority status to the infra sector, a certain percentage of exposure should be made mandatory for all the banks just on the lines of export financing," said ASSOCHAM.
"Besides, obligatory targets should also be imposed upon private sector banks and foreign banks operating in India as currently, major portion of infrastructure lending is contributed by public sector banks."
Banks may be permitted to issue long-term, tax free bonds for the purpose of lending to infrastructure sector at a lower rate of interest, suggested ASSOCHAM. Besides, provisions may also be made by the Reserve Bank of India (RBI) to provide interest subsidies to the banks for their exposure in this sector.
Exempting the interest income earned out of their lending to infrastructure sector for the purpose of income tax (IT) and restoration of Sec 10 (23-G) of the IT Act are also certain suggestions made to the FinMin.
ASSOCHAM has further suggested that incentives doled out to the infrastructure entrepreneurs earlier, should be restored and current regulations be amended.
Dividend distribution tax under sec 115-0 and minimum alternate tax under sec 115-JB must be exempted for infrastructure projects.
Besides, an exemption of long-term capital gains and dividends for investments made in an infrastructure special purpose vehicle (SPV) by an infrastructure capital company - Sec 10 (23-G) of IT Act (Discontinued - 2006), is also suggested by ASSOCHAM.
For infrastructure companies having SPV structure being a bidding or statutory requirement 14A disallowance may be removed.
Considering that SPV structure in infrastructure sector requires the promoters to infuse funds into its subsidiaries as equity investments or sub debt from either borrowed funds or from their own funds. While, the Section 14A of the IT Act disallows amount of interest and other expenses on such borrowed funds.
All tax concessions given for developers operating in the space of special economic zones (SPZs) should be restored and the tax holiday under section 80-1A of the IT Act (to be expired in 2013) should continue till the end of 12th plan period.
Apart from the aforesaid suggestions, ASSOCHAM has also suggested the FinMin (finance ministry) for providing incentives to the foreign institutional investors (FIIs) to lure their investments in the infrastructure sector.